Housing Inequality and Affordability

Posted by Leo Nelson on February 18, 2016

Dr HUGH McDERMOTT (Prospect) [5.23 p.m.]: Today I address the House on housing inequality and affordability in the electorate of Prospect. New South Wales has experienced widening income inequality. It is the high earnings of bankers and senior business leaders that stand out as drivers of inequality in New South Wales today, not an elite living off inherited wealth, as was the case in the past. Families confront a vivid example of this inequality. The value of the house they own, and hence the imputed rent they receive from it, has risen by far more than their earnings. This is driving a new form of inequality between the insiders, who are already in the property market, and the outsiders, for whom the barriers to entry are too high.

Families on modest wages have to devote half their income to pay the mortgage or rent, leaving little left over. The rise in house prices is a straightforward failure to match supply to demand, coupled with inequitable tax and public policy. We also have a planning system that makes it hard to build new houses and a State Government that does not invest in relevant infrastructure—namely, schools, health care, public transport and local jobs. This has led to high house prices and barriers to young people getting onto the housing ladder. This creates anger in the dispossessed.

After housing, the other major form of personal wealth in New South Wales is superannuation. Again, there are insiders, with generous occupational superannuation, and outsiders, who are unlikely to ever build up such an asset. Young people are now working hard to earn revenues that are being used to plug superannuation deficits. Deficits in superannuation schemes for older and retired workers have been closed to today's workers.

In both cases there is a clear pattern: the inequality between the generations. It is the baby boomers, born between 1945 and 1965, who have ended up with the valuable houses and the gold-plated pensions. This inequality offends our sense of fairness, but it also offends the hope at the heart of the modern Australian social contract that each generation will be better off than the one before it. This inequality in the ownership of wealth between generations is now a deep problem in the structure of our society in New South Wales. It is the result of political decisions that have been shaped by the interests of the incumbent generation. We see a generation failing to recognise the claims of future generations. Instead, it harnesses the power of modern government to protect its narrow interests. This is the key driver of a new and worse kind of inequality.

We must consider the effects of these policies on family structure. We must decide whether we care about the individual or the household. The family is one of the most effective mechanisms we have for the redistribution of wealth from rich to poor and across generations. Your position, relative to others in our society, affects your status and your ability to control your own life and health. We must all recognise that inequality matters. A renewed focus on inequality challenges both political parties. Any serious modern form of reform has to be honest with the electorate: If there is to be more money for public services, the electorate has to pay for them. There is not one group whose members are so rich and so numerous that their incomes or assets can be taxed to pay for education, health care and other benefits without the rest of us having to contribute more. We cannot simply tax the rich to pay for the welfare state. Instead, we need to appeal to mutual obligation of all citizens. It is then that we face the question of whether the people believe any longer that we are all in this together.

Modern society in New South Wales may now be too diverse for people to agree that we should all fund the welfare state. Bashing the rich then becomes an understandable but unworkable way out of this problem. As the gap in income and wealth widens, the Baird Government appears not to care. I have heard Government members argue in this House that wealth is a reward for exceptional talent and risk-taking. That is tantamount to arguing that the rich are rich because they are better than the rest of us. What rubbish! It is a series of accidents and chance events that puts some people on the path to riches and excludes others. The distribution of rewards is not shaped by some moral principle and we should not defend it by claiming that it is.

A pop star or a city whiz-kid may earn far more than a nurse, a police officer, a labourer or a scientist, but the market does not distribute its gains according to moral judgements on relative worth. Instead, there are real actions to take and policies to implement that will reduce inequality in New South Wales. Above all, younger generations must be given the chance to participate in our property owning democracy too.